I believe that investors and traders have been ignoring the “canary in the coal mine” smell of the bursting stock market bubble. The “black swan” event is the Federal Reserve unwinding its huge balance sheet. This is a market factor that has never been seen before.

At the end of the third quarter the Federal Reserve had flushed $307 billion down the toilet that could have provided money to fortify health care reform and begin infrastructure spending. Instead it’s squeezing the U.S. economy and banking system.

The Dow Jones Industrial Average (25,598.74 on October 10) set its new all-time intraday high of 26,951.81 on October 3. The Dow is below its 50-day simple moving average and approaching its 200-day simple moving average of 25,142. The weekly chart goes from an “inflating parabolic bubble” to negative given a close below the five-week modified moving average of 26,085 on Friday.

My annual, semiannual and monthly value levels are 24,666, 24,323 and 24,135, respectively, with weekly and quarterly risky levels of 27,041 and 28,401, respectively. To be up by 20% from its 2018 low, the Dow would have to trade above 28,013.

Courtesy of MetaStock XenithCourtesy of MetaStock Xenith

The S&P 500 Index (2,785.68 on October 10) set its all-time intraday high of 2,940.91 on September 21. It is well below its 50-day simple moving average at 2,878.54 and has been trading back and forth around its 200-day simple moving average of 2,765.97 on Thursday, after a morning low of 2,745.46. The weekly chart is negative with the index below its five-week modified moving average of 2,880.45.

My monthly and semiannual value levels of 2,725.6 and 2,714.9, respectively, with my annual pivot of 2,769.1 and weekly and quarterly risky levels of 2,948.5 and 3,032.9, respectively. To be up by 20% from its 2018 low, the S&P 500 would have to trade above 3,039.23.

Courtesy of MetaStock XenithCourtesy of MetaStock Xenith

The Nasdaq Composite (7,422.05 on October 10) set its all-time intraday high of 8,133.30 on August 30. The Nasdaq is below its 50-day and 200-day simple moving averages of 7,910.62 and 7,500.93, respectively, The weekly chart for the Nasdaq is negative with the index below its five-week modified moving average of 7,906.55.

My annual value level is 6,928 with my annual pivot of 7,374 and my semiannual, weekly and quarterly risky levels of 7,751, 8,026 and 8,343, respectively. The 7,374 level was a magnet on Thursday. The Nasdaq needs to trade back above 7,956.80 to return to bull market territory.

Courtesy of MetaStock XenithCourtesy of MetaStock Xenith

The Dow Jones Transportation Average (10.550.92 on October 10) set its all-time intraday high of 11,623.58 set on Septenber 14. Transports are below its 50-day and 200-day simple moving averages of 11,286.89 and 10,815.16, respectively. The weekly chart for transports is negative with the index below its five-week modified moving average of 11,776.70.

My semiannual value level is 10,050 with my semiannual pivot of 10,681 with my annual, weekly and quarterly risky levels at 11,401, weekly and quarterly risky levels of 11,589 and 12,310, respectively. To be up by 20% from its 2018 low, transports would have to trade above 11.768.15.

Courtesy of MetaStock XenithCourtesy of MetaStock Xenith

The Russell 2000 (1,575.41 on October 10) set its all-time intraday high of 1,742.09 on August 31. The small-cap index is below its 50-day and 200-day simple moving averages of 1,693.13 and 1,620.12, respectively. The weekly chart for the Russell remains negative with the index below its five-week modified moving average of 1,689.58.

My semiannual value level is 1,549.40 with my annual, monthly, weekly and quarterly risky levels of 1,664.90, 1,683.94, 1,705.95 and 1,804.00, respectively. To return to bull market territory and be up by 20% from its 2018 low, the Russell 2000 needs to trade back above 1.723.72.

Courtesy of MetaStock XenithCourtesy of MetaStock Xenith

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Richard Suttmeier, a former Treasury bond trader, has 45 years experience in the financial markets. He's an engineer by education with a master of science degree.

I am CEO and founder at Global Market Consultant, Ltd., and an expert contributor to TheStreet.com. I hold an engineering degree from Georgia Tech and a masters degree from Brooklyn Poly and have 40-plus years experience as a trader, trading manager and research analyst at...

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